The Cost of Rising Nationalism Is So Much More Than Political Turmoil

By

Katherine Bell

Jan. 25, 2019 8:08 p.m. ET

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“If I had to select one sentence to describe the state of the world,” Secretary-General of the United Nations António Guterres told a crowd at the World Economic Forum in Davos, Switzerland, on Thursday, “I would say, ‘We are in a world in which global challenges are more and more integrated and the responses are more and more fragmented, and if this is not reversed, it is a recipe for disaster.’ ”

The unintended consequences of globalization and the populist and protectionist backlash gaining momentum around the world were causing anxiety at the WEF’s annual meeting this past week. “All of a sudden, people are questioning where we are in the economic cycle,” Joshua Friedman, co-founder and co-chief investment officer of Canyon Partners, told me. “We’re accumulating a laundry list of unsolved macroeconomic problems—trade, Brexit, the shutdown—any one of these can affect confidence. And markets are confidence games.”

CEOs in banking, manufacturing, and retail told me they had already made expensive operational changes to prepare for worst-case trade war and Brexit scenarios—moving production from China to Vietnam and India, for example, or spending hundreds of millions of dollars to relocate London-based trading and banking operations. These are sunk costs that won’t be reversed, even if 25% tariffs or a hard Brexit don’t come to pass.

There’s another potential cost to rising nationalism, one that would be borne most heavily by the world’s poorest citizens.

One of the greatest successes of the past two decades has been the astonishing 40% drop in child mortality in low- and middle-income countries. What caused such a precipitous change? Multinational collaboration, capitalist principles, and a lot of money. As Secretary-General Guterres might put it, an integrated response to a global challenge.

Here’s how it worked: A handful of organizations, including the Global Fund; Gavi, a global vaccine alliance; and the Global Polio Eradication Initiative, raised a great deal of money from governments and philanthropists. They used their scale and purchasing power to buy vast quantities of vaccines and reliable medications for malaria, tuberculosis, and HIV at low cost. And then they solved the logistical challenges of getting them to the communities where they were needed, no matter how remote. Deaths from AIDS have dropped by more than half, and polio has all but disappeared.

In a world full of chance and complexity, where the results of our attempts to improve things are often difficult to measure, this is a refreshingly simple equation.

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The Bill & Melinda Gates Foundation put in $10 billion, and Bill Gates called it the best investment he’d ever made. “It almost feels like a miracle to pay pennies and prevent diseases,” says Sue Desmond-Hellmann, CEO of the Gates Foundation.

Now, there could be a problem.

Every five years, each of these institutions has to replenish their funds, and in the next 18 months, all three must do so at the same time. They need billions of dollars, and a significant amount of that has to come from the foreign-aid budgets of countries like the U.S., the United Kingdom, Germany, and Japan.

In 2019, the word “global” in all of those institutions’ names is a challenge. “We are asking people to think about global issues at a time of nationalism,” Desmond-Hellmann says. “If your citizens are saying, ‘We are struggling over here. What are you giving to global causes? What about home?’ That’s actually a valid question.” Foreign aid may be pulled away, and without that funding, many of the gains of the past 20 years could be erased.

This matters to investors.

Beyond the lives saved and suffering prevented, there’s a strong economic case not only for replenishing these particular funds now, but also for extending this kind of collaborative, public-private approach to other global crises.

First of all, Desmond-Hellmann says, “the threat of disease anywhere is the threat of disease everywhere.” Pandemics are a real and scary risk. There’s another Ebola outbreak in Africa now.

And as Bill Gates explained in an essay in The Wall Street Journal, “The $10 billion that we gave to help provide vaccines, drugs, bed nets, and other supplies in developing countries created an estimated $200 billion in social and economic benefits.” That’s what economists call the “demographic dividend”—the economic growth that can follow when a country’s working-age share of the population surpasses the non-working-age share.

When children don’t fall ill from common and preventable or curable diseases, they’re a lot more likely to grow into productive adults who can work and take care of their families. Growth in emerging markets depends on a strong and healthy workforce. And as those healthy adults move into the middle class, they become consumers, as well—a growth market for the multinational corporations that most investors invest in.

In rich countries like the U.S., globalization left too many people behind. As the tide turns back toward nationalism, we risk making the same mistake, leaving children around the world vulnerable once again to diseases we can easily afford to prevent.

The Cost of Rising Nationalism Is So Much More Than Political Turmoil

“If I had to select one sentence to describe the state of the world,” Secretary-General of the United Nations António Guterres told a crowd at the World Economic Forum in Davos, Switzerland, on Thursday, “I would say, ‘We are in a world in which global challenges are more and more integrated and the responses are more and more fragmented, and if this is not reversed, it is a recipe for disaster.

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